Here we go again, Democrats and Republicans in Congress locking horns over the debt ceiling. The debt ceiling of $28.4 trillion was hit on August 1st, 2021, meaning that the United States is unable to borrow more to pay its bills, and will soon run out of cash. (whitehouse.gov). We can thank COVID-19 for $4.2 Trillion of that debt. (GAO.gov)
Republicans have been blocking Democrats’ attempt to raise the limit, in the name of fiscal responsibility. (Olson) It should be noted that 97% of the debt accrued prior to the current administration (whitehouse.gov). Those same Republicans voted to raise the debt ceiling 3 times during the Trump administration. (Elving)
At stake is a government shutdown and default on our payments. Radical Libertarians relish the idea of a government shutdown. (See “A Note on Libertarianism” in the page “Why do we have just 2 main parties?”) I think the result of a prolonged shutdown would look more like a horror movie. Retirees wouldn’t get paid, nor government employees, soldiers and veterans. Even Libertarians would miss essential services and protections.
Defaulting on our loans wouldn’t be good either. To whom do we owe all that money? We owe to ourselves, for the most part. The federal government does not go to the bank and take out a loan. Instead, it sells Treasury Bonds, savings bonds, etc., which the government pays back to us with interest. The Social Security Trust Fund owns most of our debt. That’s our retirement, for most of us. (Amadeo)
The general public also owns a large chunk of treasuries. We individual bondholders, as well as banks, mutual funds, pension funds, and others, would get stiffed if our country didn’t pay off its loans. Add to that the long-term problems with our country’s credit-worthiness. If those who would buy Treasury bonds perceive a greater risk of failure to pay, then they will require a higher interest rate in return. That drives up interest rates on loans for all of us. Even our home and auto loans would cost us more. That could throw us into a recession. (Dickler)
During our 2013 debt crisis, it was suggested that we “prioritize” payments, paying off bond holders and leaving Social Security recipients, etc., unpaid. (Ydstie) Some people even suggested that we stiff foreign investors, such as China. It turns out that foreign investors represent only a small fraction of our creditors. Not only would that fail to solve the problem, it makes us dead beats, and a risky investment on a par with some third world countries.
There is a disconnect between true Conservative values (financial responsibility) and the behavior of Republicans in Congress. (Please see the article on “’Conservatives and Liberals”, not “Republicans and Democrats.”’) The debt ceiling is not a good place for us to play Russian Roulette.
10,000 foot view from above the middle:
The United States does have a large and unwieldy debt relative to our GDP. (Please see the page on “Government Spending.”) Republicans complain that the Democrats’ agenda is overreaching and will add $3.2 Trillion to our massive debt. (Fox)
Although Liberals may have no sympathy towards wealthy Republicans who don’t want to pay high taxes, they should be mindful of the Conservative principal of limited government, and their aversion to details. Some of the Progressive demands may be a bridge too far.
It appears that default and government shutdown may be averted for the time being. Liberals and Conservatives each should acknowledge the higher principals of the other side, rationally compromise, and move forward.
References
The Debt Ceiling: An Explainer. October 06, 2021 accessed 10/8/21. By Chair Cecilia Rouse, Ernie Tedeschi, Martha Gimbel, and Bradley Clark. https://www.whitehouse.gov/cea/blog/2021/10/06/the-debt-ceiling-an-explainer/
Financial Audit: Bureau of the Fiscal Service’s FY 2020 and FY 2019 Schedules of Federal Debt. GAO-21-124 Published: Nov 09, 2020. Publicly Released: Nov 09, 2020. https://www.gao.gov/products/gao-21-124
Olson, Tyler. House Republicans prep debt limit fight to ‘force action on our nation’s spending problem.’ GOP memo proposes demands for upcoming debt limit fight. Published June 15, accessed 10/8/21. https://www.foxnews.com/politics/house-republicans-debt-limit-fight-spending
Amadeo, Kimberly. Who Owns the US National Debt? The Biggest Owner Is Not Foreign Entities, but U.S. Taxpayers. Fact checked by David Rubin, Reviewed by Thomas J. Catalano. May 03, 2021 accessed 10/8/21. https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124
Dickler, Jessica. What the federal debt ceiling showdown could mean for you. Published Mon, Sep 20 202110:42 AM EDT. Accessed 10/8/21 https://www.cnbc.com/2021/09/20/what-the-federal-debt-ceiling-showdown-could-mean-for-you.html
Elving, Ron. Congress is seeking (its own) permission to borrow another trillion or two. September 24, 20215:01 AM ET accessed 10/8/21. https://www.npr.org/2021/09/24/1031701538/congress-debt-ceiling-explainer
Ydstie, John. In A Debt Crisis, U.S. May Have To Decide Payment Priorities. October 7, 2013 accessed 10/8/21. https://www.npr.org/2013/10/07/229856550/in-a-debt-crisis-u-s-may-have-to-decide-payment-priorities